Posted
by
Soulskill
on Thursday February 28, 2013 @12:43PM
from the system-and-method-for-being-a-leech dept.

Zordak writes "According to Law 360, H.R. 845, the 'Saving High-Tech Innovators from Egregious Legal Disputes' (SHIELD) Act of 2013 would require non-practicing entities that lose in patent litigation to pay the full legal costs of accused infringers. The new bill (PDF) would define a 'non-practicing entity' as a plaintiff that is neither the original inventor or assignee of a patent, and that has not made its own 'substantial investment in exploiting the patent.' The bill is designed to particularly have a chilling effect on 'shotgun' litigation tactics by NPEs, in which they sue numerous defendants on a patent with only a vague case for infringement. Notably, once a party is deemed to be an NPE early in the litigation, they will be required to post a bond to cover the defendants' litigation costs before going forward."

Me being a pessimist, I figure it could be real, and could be quite likely to pass.

It should put the nail it the coffin of those annoying inventors applying for patents, and keep the patents where they should be, in the hands of the overlords.

If this law is tailored to the job, not only will you have to be able to afford to go round after round of appeal, but if you lose on any of them, you face instant financial ruin. So then if the ones you sue don't come to terms, then your goose is cooked before you be

You're wasting your breath. It's just like patents. The title and tiny summary at the beginning isn't the patent... the claims are the patent. But guess what, a large percent of the people I hear complaining about patents didn't bother reading what is actually claimed. Why would those same people who were complaining about patents read the contents of a law to see what it actually says when they can just stick with being lazy and bitching about the summary of the law instead?

Company X is our patent troll, decides to sue someone.Company X's owners establish Company Y with just enough money to litigate their side of the caseCompany X sells the rights to a patent to Company Y for a pittanceCompany Y Sues and losesCompnay Y Has no holdings beyond the now largely useless bogus patent so it dissolvesCompany X loses nothing except the patent, which again, is now largely useless

If Company Y wins, they sell the patent back to Company X and the owners ca

IANAL but I suspect that in a case like this the judge would pierce the corporate veil since Company Y is clearly just an attempt to circumvent the intent of the law with a legal fiction. Specifically that Company Y is truly acting independently when in fact it is acting purely within the parameters dictated by Company X and purely within the interests of Company X.

Company X is our patent troll, decides to sue someone.
Company X's owners establish Company Y with just enough money to litigate their side of the case
Company X sells the rights to a patent to Company Y for a pittance
Company Y Sues and

wins... Company Z, the infringer, points to the pittance as being Company Y's valuation of the patent, and offers to pay a reasonable royalty of 5% of said pittance. The judge, finding this unbelievably clever, agrees. Company X's owners sob in the corner.:)

These NPEs are a serious threat to large patent holders. Normally, patent holders come to some sort of agreement. In the case of NPEs, there is almost no negotiating. These large patent holders invariably have a lobby or two which they contribute to. NPEs? Not so much.

I absolutely agree, few laws get passed that don't screw some one else somewhere. But this is at least a step in the right direction. This action has been a long time coming and hopefully won't have many bad side effects.

It is probably not a power grab, actually. Working in a business where my company has been threatened by patent trolls (and we settled), the fact that trolls can simply extort settlements out of producing companies is all the motive required.

There's no need for a move like this to move forward some sort of sinister agenda: there is plenty of money and uncertainty to be saved in simply ending this practice on it's own merits alone.

The "lone inventor around the corner" using his patent to fight the big corporations is kind of a myth nowadays. Patents are used to stifle innovation and protect entrenched businesses, not to prevent corporations from stealing the little guy's ideas. I'm pretty sure the vast majority of patent-holders are corporations.

Loser pays is a terrible idea, unless you can guarantee that the legal system 100% of the time accurately determines who is wrong (as opposed to who has the best/most lawyers). As a person with limited resources, I would never be able to risk suing a corporation over something, because, even if I had a 1% chance of losing, that chance would mean instant bankruptcy for me. Similarly, corporations would have even more incentive to use bogus lawsuits to extract settlement money from individuals who would never

Loser pays is a terrible idea, unless you can guarantee that the legal system 100% of the time accurately determines who is wrong (as opposed to who has the best/most lawyers).

Without loser pays, anyone who gets sued already lost. You get to pay millions to prove your innocence. So there's a loss for being innocent. Loser pays fixes that. What would you propose to protect the innocent from frivolous lawsuits?

Loser Pays applies to virtually the entire rest of the galaxy, and, while not perfect, it is way better than the Loonie Tunes US approach. Here in the UK, it applies to both criminal and civil law in 100% of cases, unless the judge decides the loser was partly to blame - eg deliberately made himself look guilty to attract a law suit.

In almost every civil action there is something called a counter suit. What is my option when you shut down my business because of an alleged patent infringement? What do I counter sue for? Nothing, because there is no protection from arbitrary and ambiguous patents or lawsuits using such patents. Even in cases where a patent has been invalidated during the trial process, the defendant has tremendous losses. Those losses can not be recouped. If I pay a troll and the patent gets invalid

Loser Pays applies to virtually the entire rest of the galaxy, and, while not perfect, it is way better than the Loonie Tunes US approach. Here in the UK, it applies to both criminal and civil law in 100% of cases, unless the judge decides the loser was partly to blame - eg deliberately made himself look guilty to attract a law suit.

Wait, if I'm charged with a criminal offence in the UK, and found not guilty, I get my lawyers fees reimbursed by Her Majesty?

I don't think it works that way in Canada; I'd be quite interested if you could clarify that.

We do of course have loser pays in civil proceedings, unless judge decides otherwise, and on a fee schedule applied by the judge.

if you look at the bill it seems this is not loser pays for everybody. Its if you purchase patents from corporations, produce nothing, then sue people you have to first put up a bond. How many entities do you know of that 1) Purchases patents from corporations, and 2) Produce nothing, and 3) Sue people over said purchased patents? These people are trolls. think about it. If you are a small guy and you came up with some new invention and patent it then you would be the original inventor on that patent

Loser pays as a statutory requirement is a bad idea. However, loser pays should be an allowed option in every civil case, something that the judge/jury can impose when the circumstances warrant it. When the plaintiff has presented a good case, but still loses, loser pays could be unnecessarily punitive.

No, he means a legitimate small player *making use of the system as it was intended under the concept of equal protection under the law*. Having money is not supposed to be a prerequisite for obtaining justice in the US, at least in theory, of course.

I should be able to sue Apple or Samsung or some other multinational and if my case is correct and proven under the law, I not only deserve to win, I am supposed to win.

The fact that patent trolls can weasel into the space left for the small guy to have his voice heard doesn't mean that that method becomes expendable. It means we need a solution that filters patent trolls out better.

I agree that trolls need to be stopped. My own organization have been extorted by them. They're a parasitic entity made possible by government rules that would not exist without a broken patent system. However, fix the patent system, don't simply carpet bomb any requests from people who don't have money.

From what I understand the people who don't have money will not be affected here because they are the original inventor and only people with money purchase patents from corporations to sue other corporations. If you sat down in a barn and came up with a neat idea that you patented and YOU are registered as the original inventor then this law would not apply to you because you obviously did not acquire the patent you are the actual inventor.

I am mostly in favor of this provision, but honestly, we need to be very careful about putting pricetags on justice to fight the other implied pricetags. I would prefer, personally, that the patent system be corrected, instead of a band aid like this be applied. We need to make it easier to quickly dismiss these cases as frivolous, as opposed to simply upping the ante. Because ultimately, if the patent troll is big enough, they *will* be able to post the bond, and the extortion will continue.

It is a big deal to those corporations. Although settling isn't that big of a deal, the money they pay the patent trolls only empower them to buy more patents and sue more companies. Also, there are some really gutsy patent trolls that don't settle and instead try to get the jury to pay the off big. "Members of the jury, the sale of the companies product is in use by their product. For this reason we want a mere 5% of the total sales of their devices" (They say this in an industry where the profit margin is

Wow, did you read anything at all or did you see "patent" and just start posting? If you read anything and are posting, you must be a shill. If you didn't read, shame on you. "loser" in this case is limited to a defendant where it's deemed that the company initiating the suit is a troll. The wording in the article states very clearly that if you are deemed a NPE (more on that in a moment) then you must pay a bond to cover the defendant's cost in order to pursue the case.

NPE: You are a widget maker, and competing with 10 other widget makers in the market place. Trollguy buys a patent for a screw that you use in your widget and he sues every one of you dirty widget makers for infringing on his patent for a widget-screw. He does not make widgets, did not invent a widget, and in fact his current business is buying patents and suing people. He would be by definition a NPE. As a NPE, he needs to bond the defendant's legal fees, for every one of those cases of alleged infringement, in order to pursue the cases.

That is a good thing!

In addition: If the infringement claim is dies in court you, Mister Widget, immediately recoup your legal fees by cashing in the bond.

Now if Joe's Widgets sues you for stealing their rounded corner widget design, they are not a NPE. They do not have to bond your legal fees. So the law does not harm normal competition and does not punish inventors. It's at least "some" protection from the current joke that has become patent trolling.

Since I have not fully read the Bill I can not claim that the wording is secure and clear enough to really do anything. Politicians are generally shitheads, and even the best written and intended Bills can get screwed up by their idiocy. That fact is rarely the Bill's fault, but rather the people's fault for voting in shitheads over and over and over again.

This could never pass as it is way too logical. I believe this rule should apply to all litigation, civil and criminal. Why should the government be allowed to bankrupt an individual by accusing him (or her) of a crime that they did not commit? If the government loses it should pay the defendant's legal expenses and vice versa. It would add further punishment to those convicted of crimes.

Correct. But this makes it worse for them inthat they will be increasingly targeted by NPEs who don't want to take the risk of going to court with one of the big players.

Unlikely. The reason they don't usually go after the small companies is because they are small, i.e. they have no money. There is little point in spending much money trying to extort a tiny settlement out of a company that the NPE may very well bankrupt in the process. If I'm a small company I would basically say "bring it on". They'll spend more money on lawyers than they would win in a settlement and even if they did win they probably would get nothing because the company would declare bankruptcy.

They only have to pay if it's deemed that they haven't done anything to use the patent and aren't the original owners of the patent. How many legitimate (aren't patent trolls) small shops are buying up patents and sitting on them?

A small shop can not afford to take a case to court even without paying the defendant's lawyers. An IP lawsuit costs millions of dollars to pursue; more money than any normal person will make in his entire working lifetime. The courts are for the big fish. For the rest of us, any involvement with them leads to bankrupcy.

That depends. Some lawyers are willing to take defense cases on a contingent fee basis. I was sued once for defamation. Because the case was filed in a state where there were strong anti-SLAPP laws, my, normally 500/hr lawyers took the case for (mostly) free with a relatively small retainer. They were so confident the case was bs, had no chance of winning, and that they could get paid through the anti-SLAPP statute, they were willing to take the small risk of losing. The case ended up costing the plaintiff probably close to half a million by the time the dust settled (the judge even granted them a 1.5x multiplier for their risk). The point is there are lawyers out there who are willing to take these sorts of cases if there are statutes out there that will allow them to get paid. I think this sounds like a good law, even for the small guys.

And there you have the REAL reason why this law is being proposed and why it will pass. It's for the benefit of lawyers. This law ensures that more lawyers will get paid, essentially extending the anti-SLAPP environment to patents, and for the same reasons. If there are any benefits to inventors or the real economy, it's purely coincidental.

A small shop is not a NPE. A small shop is not suing people with patents purchased from corporations without having any products or plans for products what-so-ever. A small shop doesn't procure unmanned offices in the Eastern District of Texas. A small shop can sue for infringments on their own patents without putting up the bond. What the law says is you just cant purchase patents, have no intent to produce anything, and sue world+dog without putting up a bond first. Nothing is stopping you from inve

Small shops are not out there filing lawsuits against numerous alleged patent infringing companies. Generally they are the targets of that approach. The bill would allow the targets of patent trolls the ability to recoup losses that they currently have no ability to recoup. Currently the defendants either pay the troll, or pay for lawyers to fight. There is no recovery currently for any part of the trial. The current methods of patent trolls are extortionist.

The bill is designed to particularly have a chilling effect on 'shotgun' litigation tactics by NPEs, in which they sue numerous defendants on a patent with only a vague case for infringement.

So to achieve that, instead of addressing shotgun litigation by any litigant, they create an inhibition to all NPEs. That would include things like the The Open Invention Network [wikipedia.org], and would exempt practicing entities like SCO. Does that sound right?

This legislation would create unequal patent protection for big corps versus independent inventors. Once a patent is sold by its original inventor, it can only subsequently be sold to big corps or it loses some of its power. This means big corps will have an advantage compared to independent inventors, who will have less ability to market their inventions.

If the problem is shotgun patent enforcement, regulate shotgun patent enforcement. If the problem is overbroad patents, narrow the allowed scope of patents. Address the real problem with equal treatment for all litigants under the law. Don't create a preferred class for big incumbent corps and inhibit independent competition.

This is nothing more than another land grab by big incumbents who use our government to inhibit free market competition.

1. The Open Invention Network actively licenses the patents it holds, so it would not be considered an NPE.
2. The SCO litigation was about copyright, not patent.
3. Your statement about unequal protection is false, a non sequitur, and illogical. Big corporations do not "own" the patents it. A shell company in a tax haven like Ireland owns the patents and license them back to the parent, and other licensees. If the Open Invention Network is considered an NPE then so are these shell companies.
4. Attorneys fees to a defendant are already allowed in many types of cases when it is determined that the plaintiff had no business filing suit, including patent litigation. Revising the patent law so that a bond has to be placed before the suit can go forward ensures the wrongfully accused defendant will actually get paid and the plaintiff can't just vanish after they lose, thus leaving the defendant with the attorneys fees.

Your visceral knee jerk reaction to a concept that you do not understand is absurd.

That is completely wrong and the word inventor doesn't mean what you think it means.

Assuming you are right, if the inventor "needs to be part of the network" then 99% of patent holding companies would be NPEs, because as I said before - Big corporations do not "own" the patents. A shell company in a tax haven like Ireland owns the patents and license them back to the parent, and other licensees. If the Open Invention Network is considered an NPE then so are these shell companies.

While patent lawsuits are particularly important, why is it that we have to make a new law for this at all? Shouldn't we have this for all lawsuits across the board? It can still be allowed for judges to decide in specific cases if the situation does not warrant this requirement. But overall it should normally be the way it is done.

Is it in all civil cases so that loser pays winner's cost, and court cost?

In that case it would indeed be quite reasonable that when initiating a law suit, the plaintiff should post some kind of guarantee that they will pay loser's cost (preferably a fixed amount based on type of lawsuit etc, so that this is known before the suit is initiated and not dependent on the mood of the judge). That might make actually getting the money afterwards a little less impossible.

What you propose would make it nearly impossible for a private citizen to ever, ever again sue a corporate citizen. Big corporations have dozens of lawyers on staff, so they can easily rack up "millions" of dollars of work on a lawsuit. (Of course, if the suit were never filed, those lawyers would have instead racked up millions of dollars of work doing something else as they are salaried employees.) With the chilling effect of you having to pay those fines if you lose the lawsuit, why would you, a mere

What he proposes is what the law is throughout most of the globe. The exceptional state (the U.S.) has what is called "the American Rule" that each side bears their own Court costs and Attorneys' fees unless there is an agreement to the contrary.
-Adam

So, why doesn't this apply to all civil lawsuits? This is how it works in many countries thus their courts aren't tied up as bad as ours (i.e. American).http://en.wikipedia.org/wiki/Loser_pays [wikipedia.org]

So, why doesn't this apply to all civil lawsuits? This is how it works in many countries thus their courts aren't tied up as bad as ours (i.e. American).http://en.wikipedia.org/wiki/Loser_pays [wikipedia.org]

Justice is imperfect. If the little guy who is in the right sues a big corporation and loses, he could be bankrupted by the big corporation's legal fees.

It is in much of Europe. You're not suggesting that the freedom loving democratic USA has more corruption in Government than us Euro-weenies, are you?

The last British government (you know, the American(Murdoch)-Australian(Blair) one was heading down the same route, but amazingly most British judges are rather sensible and tend to discourage frivolous and exploitative lawsuits; companies that have tried it have gone bankrupt or even had the Law Society feeling their collars. Perhaps we should send you some r

Having the plaintiffs in a false claim pay 1.5x to 2x the defendants costs would be better. Perhaps the assessing of higher costs could be left up to the court, if the lawsuit was determined to be egregious.

Unfortunately I make it the Saving HIgh-Tech INnovators From EgregIous Legal Disputes, or SHIT IN FEILD Bill. Spelling error apart, this is indeed likely to be as successful as trying to persuade bears not to poo in the woods.

So what if this gets challenged by the trolls under the grounds that it may be unconstitutional.
They may argue that if a patent is a property right like a house then as the new owner they should be able to enjoy the same priveleges as the previous owner.
Or the may argue that the law discriminates against them as the new owners of the said property. Not sure how those arguments would hold up though.

nb. This assumes the Slashdot summary is accurate and there's no hidden loopholes.

But that product doesn't have to actually *work*.

Also, they'd probably only have to offer the product for sale. Actual customers wouldn't be necessary.

Or two separate patent trolls get into the business of building products and selling exactly one each to each other for $1,000,000. If the law tries to prevent this, they use 3 trolls and a few shell corporations so they are all classified "Practicing Entities".

My pending patent has already been assigned to my superiors. I'm not sure exactly how this is implemented, but i think the point of the law is to allow this kind of thing (it's how capitalism is supposed to work, after all) while stopping the kind of patent troll which buys up a collection of older, tactically useful, patents for pennies and then spams lawsuits with them.

A non-practicing entity could still acquire patents and troll with them, if they were the original assignee. So, it's a conservative law;

I like this bill but I would take it a step farther. If the patent troll loses, not only do they have to pay the defense, they need to compensate the poor SOB they sued, AND they need to lose access to the original patent they where suing over.

No, its perfectly fair. Most patent trolls are lawyers anyway. A lot of them know they are just fishing for free money, Don't have any sympathy for them.

Lets say you and your friends get together and circle jerk every Friday night. Now then, I'm a patent troll that has filed a patent on circle jerking. Now a patent on circle jerking is stupid, I know that, and you know that but my plan is to sue you and your friends anyway hoping you will settle. Now you decide to fight my patent so we go to court.

No, they do not fix everything at once, so fucking what? They are at least trying to fix part of the problem.

Yeah would be nice to have all the worlds problems solved in one go, but you know what, it's much easier to fix it if we solve it one step at a time.

Sometimes a partial fix can make a problem more difficult to completely fix. When they fix one part of a problem, the other parts that remain look much less severe and risk becoming "too low of a priority" / too minor of an issue to get fixed.

Naming it "intellectual property" doesn't make it real property. Patents are not property. Patents are purely a legal fiction to grant a monopoly to some entity. Patents expire, vanishing into thin air. Property does not expire. And no, that doesn't mean patents should last infinitely long, either. They're a fiction. A badly constructed legally exploitable fiction. This law is trying to fix some of the fuckups in the current construction. There is no property involved.